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Sunday, 14 May 2017

Investopedia/Damian Davila: If You Had Purchased $100 of Bitcoin in 2011

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If You Had Purchased $100 of Bitcoin in 2011

By Damian Davila | Updated May 2, 2017 — 9:25 AM EDT

Robert Arnott said it best, "In investing, what is comfortable is rarely profitable." The decentralized, peer-to-peer, cryptocurrency system called bitcoin puts this claim to the test. The following is how you would have fared throughout the years if you had bought $100 worth of bitcoin back in 2011.
2011: Off to a Good Start

For purposes of this comparison over time, the bitcoin market value prices from the CoinDesk Bitcoin Price Index are used, and no fees or additional transactions are assumed, for the sake of simplicity. By buying $100 in bitcoins on Jan. 1, 2011, you would have benefited from a low market value of 30 cents per bitcoin and received a total of 333.33 bitcoins for your initial purchase.

Since bitcoin traded at 6 cents for most of 2010, you would have timed your initial purchase right. In this first year, you would have had your first taste of the cryptocurrency's high volatility. For a brief moment on June 8, 2011, bitcoin hit a high of $31.91, making the paper value of your investment a cool $10,636.56. By Dec. 31, 2011, bitcoin was trading at $4.72, so you would have turned your $100 into $1,573.32.
2012: Steady Increase

The first day of 2012 would have welcomed you with a closing price of $5.27, bumping up your investment to $1,756.65. Throughout the first quarter of 2012, the price of bitcoin dipped below the $5 mark. It started appreciating again in May 2012, and closed at $13.51 on December 31, 2012.

Your current investment would have stood at $4,503.29. In 2012, few businesses accepted bitcoin as a form of payment. For example, bitcoin payment processor BitPay only had 1,000 businesses using its platform. One of those businesses was Utah-based Bees Brothers, so you could have purchased 450 half-pound bags of honey roasted almonds for your friends and family.
2013: The Big Ride

Unlike the previous year, 2013 would have welcomed you with a slight dip to $13.30, turning your investment into $4,433.29. Throughout most of this year, you would have been losing sleep over the security of your bitcoins. On March 18, 2013, the Financial Crimes Enforcement Network (FinCEN) issued guidelines for individuals using bitcoin in the United States, causing problems for many, including the Mt. Gox bitcoin exchange. The attacks by hackers against several bitcoin exchanges and the FBI seizure of more than 170,000 bitcoins from criminal online portal Silk Road caused the market price to go up and down.

As the Chinese media started promoting bitcoin as an alternative currency and Baidu began accepting the cryptocurrency as payment for some services, the price of bitcoin hit an all-time of high of $1,147.25, and over $1,200 in some exchanges, on Dec. 4, 2013. Your paper value would have been $382,412.84. However, bitcoin did not fare well for the rest of the year, ending at $757.50 by December 31, 2013, making your investment worth $252,497.48.
2014: The Big Downfall

The good news is that unlike previous years, in 2014, you could have spent your bitcoins at many companies, including Overstock.com, Microsoft, Dell and Time. Paying in bitcoins offers several advantages, including more convenience in mobile payments. Also, you could have withdrawn funds through an ever-increasing network of bitcoin ATMs around the world.

However, the bad news is you would have seen your investment drop and hit a rock bottom value of $309.87 per bitcoin on Dec. 30, 2014. By the end of this year, your investment would have been worth $106,565.60, or 240 Tribecca Home Uptown modern sofas at Overstock.com.
2015: Ended Strong

In 2015, bitcoin showed a downward trend in price until late October, when the cryptocurrency started trading above $300 again. As of December 2015, bitcoin is trading at $413.51, at this point your investment is worth $137,835.29. This is a 137,735.29% return on your initial $100. The amount is less than half of that all-time high so far of $382,412.84 in November 2013, but still enough to buy a home in Burlington, North Carolina, where the median home value is $132,000 according to real estate marketplace Zillow.com, and have some money left over.
2016: A Nail-Biter

The bitcoin started off at $434.46 on January 1st, 2016, and had a relatively stable 1st quarter. Around the end of May however, the bitcoin soared and reached X by mid-June, the highest since 2014. The steep increase was due to sudden Chinese demand, which somewhat decreased in the following weeks pushing the bitcoin back down to $638.22 at the end of the 2nd quarter. Your investment is now worth $212,737.87.
2017: All-Time Highs, Twice

In February, Bitcoin broke its 2013 record and hit the $1169.04 mark (per Coinbase's price index). It hit other milestones as well, surpassing for the first time the price of one Troy ounce of gold. On May 2, it surged again to $1448. Your initial $100 worth of bitcoin are now worth $482,666.67. That's nearly 483x your investment. Not bad.
The Bottom Line

Learn about the risks of buying bitcoin, and avoid putting all your investments in this or other cryptocurrencies. While having bought and held on to $100 in bitcoin since 2011 would have been profitable, you would have suffered a lot of stress throughout the process.

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